Organigram CEO warns of unsustainably cheap cannabis, reports CA$7.5M quarterly loss

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Image of an Organigram grow room

(Photo courtesy of Organigram Holdings)

The CEO of Canadian producer Organigram Holdings is warning about heavily discounted marijuana in the nation’s recreational market, saying that ultra-low prices are “not sustainable and (hurt) the cannabis industry.”

The company’s chief executive, Beena Goldenberg, said on a Wednesday quarterly earnings call that, although “many producers have discussed not wanting to participate in a race to the bottom, we are seeing the opposite in the market.”

Goldenberg said large, 28-gram cannabis flower packages retailing for less than 100 Canadian dollars (roughly $75) have “increased by almost 300% over the past six months.”

“Large-format pricing in some markets has reached the point that, considering the cost of production and the excise tax burden, the products are being sold at a loss.”

Goldenberg added that Organigram’s “low-cost structure allows us to compete at these reduced prices” but said the Toronto-based company has “not matched the aggressiveness of our competitors and have seen some market share erosion in our large-format flower.”

Later in the call, Goldenberg said Organigram would continue competing in the large-format flower segment, “but we just won’t compete at the very low prices, it’s just not sustainable.”

The cannabis executive’s comments came as Organigram reported a net loss of CA$7.5 million for the quarter ended Feb. 28, as net revenue grew 24% from the same quarter last year to CA$39.5 million.

The company’s net loss increased 85% compared to the second quarter of 2022, with Organigram attributing that increased net loss to “to the change in fair value of derivative warrant liabilities.”

In its previous quarter, Organigram reported a net profit of CA$5.3 million.

Goldenberg said the second quarter is typically Organigram’s lowest for sales due to seasonality, with sales peaking during the summertime fourth quarter.

Organigram’s chief financial officer, Derrick West, said on the call that Organigram expects “to generate positive free cash flow by the end of calendar (year) 2023.”

Organigram claimed the No. 3 spot among licensed Canadian cannabis producers, with leading positions in pre-ground flower and hashish and a third-place spot in gummies.

CEO Goldenberg said Organigram is “underdeveloped” in the vape segment compared to its competitors.

However, she expressed optimism that Organigram’s recent CA$4 million investment in vape hardware company Greentank – which comes with an exclusivity period for Organigram to use the Toronto-headquartered businesses’ upcoming technology in Canada – will help differentiate her company’s vape products in the future.

Goldenberg said the pending vape hardware “doesn’t have the partially cooked oil that saturates the old ceramic coils, that causes the clogging and leaks and the unpleasant flavor.”

Meanwhile, Organigram is fighting back against a regulatory decision that puts another product segment at risk.

Health Canada recently asked Organigram to stop selling its Edison Jolts cannabis lozenges, which contain 100 milligrams of THC per package, over concerns that the products are misclassified as cannabis extracts rather than edibles.

Goldenberg said Organigram can keep selling the products through May 31 and “(remains) of the view that the patent-pending Jolts are properly classified as cannabis extracts and compliant with cannabis regulations.”

She said Organigram has “filed an application with the Federal Court of Canada seeking judicial review of Health Canada’s determination.”

“As court proceedings can take some time, we intend to file a motion for a stay, seeking to set aside the decision in the interim.”

Solomon Israel can be reached at